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FEDERAL COURT OF AUSTRALIA

BHP Billiton Petroleum Pty Ltd v Chief Executive Officer of Customs

[2003] FCAFC 61

Wilcox, Cooper and Allsop JJ

7 April 2003 - Sydney (heard in Melbourne)

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Wilcox, Cooper and Allsop JJ.    This is an application by way of "appeal" under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act), in the original jurisdiction of the court, on a question of law from a decision of the Administrative Appeals Tribunal (the tribunal). A bench of 3 was constituted because one of the members of the tribunal was the President: see para 44(3)(b)(i) of the AAT Act.

  2  The decision of the tribunal concerned review by the tribunal (under para 273GA(1)(ha) of the Customs Act 1901 (Cth) and para 162C(1)(f) of the Excise Act 1901 (Cth)) of certain decisions of a delegate of the respondent amounting to the refusal to pay claims for rebates for purchases of diesel fuel used in connection with oil exploration and production on the North West Shelf and in the Timor Sea.

The legislation

  3  The proceedings before us raise 2 issues in connection with the operation of s 164 of the Customs Act 1901 (Cth) and s 78A of the Excise Act 1901 (Cth). Those sections were, at all material times, identical. The matter was argued before us, and before the tribunal, by reference to s 164 of the Customs Act 1901 (Cth). No relevant difference between the 2 pieces of legislation was identified by either party.

  4  Section 164 of the Customs Act 1901 (Cth) provides for the rebate of duty in respect of diesel fuel used for certain purposes. Relevantly, subs 164(1) provides that:

   

[A] rebate is … payable to a person who purchases diesel fuel for use by the person:

 (a)  in mining operations (otherwise than for the purpose of propelling any vehicle on a public road);

 …  

  5  Subsection 164(5) sets the rebate in the case of para 164(1)(a) at 7.619c per litre. Relevantly, subs 164(5) is in the following terms:

   

 (5)  Subject to subsections (5AA) and (5AC), the rebate payable under subsection (1) to a person in respect of any diesel fuel purchased by the person for use in a manner referred to in a paragraph of that subsection is payable at the rate of:

 (a)  in the case of paragraph (1)(a) - $0.07619 per litre;

 …  

  6  For many years the phrase "mining operations" has been defined, for the purposes of para 164(1)(a), in subs 164(7). The definition has been amended from time to time. We will use the present tense to refer to the section as it stood at the dates relevant to this proceeding.

  7  There are 3 parts to the definition of the phrase "mining operations": it is said to mean what appears in paras (a) and (b) of the definition, to include what appears in paras (c) to (w), but not to include what appears in paras (x) to (z). The definition is in the following terms:

   

mining operations means:

 (a)  exploration or prospecting for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

 (b)  operations for the recovery of minerals, being:

 (i)  mining for those minerals including the recovery of salts by evaporation; or

 (ii)  the beneficiation of those minerals, or of ores bearing those minerals;

 …  

 

and includes:

 (c)  if minerals, or ores bearing minerals, are beneficiated at a place other than the mining site as an integral part of operations for their recovery:

 (i)  the journey undertaken for the purpose of transporting the minerals or ores from the mining site to that place except to the extent (if any) that the journey involves transportation by sea; and

 (ii)  the return journey of a vehicle, a locomotive or other equipment from that place to the mining site or any part of that journey if it is undertaken for the purpose of repeating a journey referred to in subparagraph (i) or for the backloading of raw materials or consumables for use in a mining operation referred to in paragraph (a) or (b); or

 (d)  the undertaking:

 (i)  of voyages to or from an Australian port by a ship that is proposed to be, or that is, used wholly or primarily in carrying out northern mining activities for the purposes of refitting or repairing the ship or its equipment for, or as a result of, carrying out those activities; or

 (ii)  of trials in connection with such a refit or repair of the ship or its equipment; or

 (e)  the liquefying of natural gas; or

 (f)  if natural gas is liquefied at a place other than the mining site-the transporting of the natural gas from the mining site to that place; or

 (h)  the reactivation of carbon for use in the beneficiation of ores bearing gold if the reactivation occurs at the place where a recovery operation referred to in paragraph (b) is carried on; or

 (i)  coal stockpile management for the prevention of the spontaneous combustion of coal if the management is carried out:

 (i)  by a person who carries on a mining operation referred to in paragraph (a) or (b); or

 (ii)  by a person contracted by that person to carry out the management; at the place where the mining operation is carried on; or

 (j)  the generation of electricity solely for, or the provision of electricity solely to, a mining town if:

 (i)  the existence of the town is necessary to enable a mining operation referred to in paragraph (a) or (b) to be undertaken; and

 (ii)  the generation or provision is carried out by the person who carries on the mining operation; or

 (k)  the rehabilitation before 1 July 1995 of a place at which a mining operation referred to in paragraph (a) or (b) has been carried on if the rehabilitation is carried out by:

 (i)  the person who carried on the mining operation at the place; or

 (ii)  a person contracted by that person to carry out the rehabilitation; or

 (ka)  the rehabilitation of a place affected by a mining operation referred to in paragraph (a) or (b) if the rehabilitation is carried out by:

 (i)  the person who carried on the mining operation; or

 (ii)  a person contracted by that person to carry out the rehabilitation; or

 (l)  searching for ground water solely for use in a mining operation referred to in paragraph (a) or (b), or the construction or maintenance of facilities for the extraction of such water, solely for that use, if the searching, construction or maintenance:

 (i)  occurs at the place where the mining operation is carried on; and

 (ii)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the searching, construction or maintenance; or

 (m)  the pumping of water solely for use in a mining operation referred to in paragraph (a) or (b) if the pumping:

 (i)  occurs at the place where the mining operation is carried on or at a place adjacent to that place; and

 (ii)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the pumping; or

 (n)  the supply of water solely for use in a mining operation referred to in paragraph (a) or (b) if:

 (i)  the supply is to the place where the mining operation is carried on; and

 (ii)  the water comes from that place or a place adjacent to that place; and

 (iii)  the supply is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the supply; or

 (o)  the construction or maintenance of private access roads for use in a mining operation referred to in paragraph (a) or (b) if the construction or maintenance:

 (i)  occurs at the place where the mining operation is carried on; and

 (ii)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

 (p)  the construction or maintenance of:

 (i)  tailings dams for use in a mining operation referred to in paragraph (a) or (b); or

 (ii)  dams, or other works, to store or contain water that has been used in, or obtained in the course of conducting, a mining operation referred to in paragraph (a) or (b) and that contains contaminants that preclude its release into the environment;

    if the construction or maintenance:

 (iii)  occurs at the place where the mining operation is carried on or at a place adjacent to that place; and

 (iv)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

 (pa)  the construction or maintenance of dams for the storage of uncontaminated water for use in a mining operation referred to in paragraph (a) or (b) if the construction or maintenance:

 (i)  occurs at the place where the mining operation is carried on; and

 (ii)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

 (q)  the construction or maintenance of private airstrips, buildings, plant or equipment for use in a mining operation referred to in paragraph (a) or (b) if the construction or maintenance:

 (i)  occurs at the place where the mining operation is carried on; and

 (ii)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

 (r)  the construction or maintenance of power stations or power lines solely for use in a mining operation referred to in paragraph (a) or (b) if the construction or maintenance:

 (i)  occurs at the place where the mining operation is carried on; and

 (ii)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

 (s)  the removal of waste products of a mining operation referred to in paragraph (a) or (b) from the place where the mining operation is carried on; or

 (t)  the disposal of waste products of a mining operation referred to in paragraph (a) or (b) at the place where the mining operation is carried on; or

 (u)  the service, maintenance or repair of vehicles, plant or equipment for use in a mining operation referred to in paragraph (a) or (b) if the service, maintenance or repair:

 (i)  occurs at the place where the mining operation is carried on; and

 (ii)  is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the service, maintenance or repair; or

 (v)  the service, maintenance or repair of vehicles or equipment solely for use in a mining operation referred to in paragraph (c) if the service, maintenance or repair is carried out by:

 (i)  the person who carries on the mining operation; or

 (ii)  a person contracted by that person to carry out the service, maintenance or repair; or

 (va)  the service, maintenance or repair of transport networks that are employed solely for use in a mining operation referred to in paragraph (c) to the extent that the service, maintenance or repair:

 (i)  is carried out on so much of the network as is located at the place where a mining operation referred to in paragraph (a) or (b) is carried out; and

 (ii)  is carried out by the person who carries on the mining operation referred to in paragraph (c) or by a person contracted by that person to carry out the service, maintenance or repair; or

 (w)  the use of diesel fuel at residential premises in:

 (i)  providing food and drink for; or

 (ii)  providing lighting, heating, air-conditioning, hot water or similar amenities for; or

 (iii)  meeting other domestic requirements of;

    residents of the premises if:

 (iv)  the use is by a person who carries on a mining operation referred to in paragraph (a) or (b); and

 (v)  the residential premises are situated at the place where the mining operation is carried on, or at a place adjacent to that place;

 

but does not include:

 (x)  quarrying or dredging operations to the extent that the purpose of the operations is to obtain materials for use in building, road making, landscaping, construction or similar purposes; or

 (y)  the use of a vehicle (other than a fork-lift, front-end loader, tractor or other similar prescribed vehicle) not exceeding 3.5 tonnes gross vehicle weight, other than such a vehicle that is extensively modified for use underground while it is so used; or

 (z)  the transport, by any means, of people, equipment or goods to or from a place where a mining operation referred to in any of paragraphs (a) to (w) is, or is to be, carried on, or to or from a place adjacent to that place, other than such transport to the extent that it constitutes the activity described in paragraph (c), (n) or (s).

 

Note: Examples of quarrying or dredging operations that are covered by paragraph (x) include operations for obtaining materials for use as concrete aggregate, road base materials, railway ballast, fill materials, building stone or monumental stone.

 

…

  8  The application before us concerns, principally, the meaning of para (z), though understood in the context and light of the balance of the definition.

The facts

  9  The applicant was engaged in exploration for, and production of, oil and gas on the North West Shelf and in the Timor Sea, as the operator of 2 projects known as the Griffin Joint Venture and the Jabiru/Challis Joint Venture, respectively. These projects are situated within the areas of certain offshore mining permits issued pursuant to the Petroleum (Submerged Lands) Act 1967 (Cth). While engaged in this activity, and for the purposes of this activity, the applicant purchased large quantities of diesel fuel.

  10  The activities involved in the above exploration and production are both onshore and offshore. For exploration, mobile offshore drilling units (MODUs) are employed; for production, floating production storage offtake vessels (FPSOs) are employed. It is unnecessary to describe these units in any detail, beyond saying that the MODUs are rigs which need to be towed from place to place, and that the FPSOs are self-propelled sea-going vessels. As the tribunal found, the applicant could not conduct all its relevant operations on or from the offshore locations. There are limitations to what can safely or economically be stored and held on the MODUs and FPSOs. Work boats, including supply vessels, support the operations by regularly ferrying people, materials, equipment and water to the offshore facilities (MODUs and FPSOs) from the onshore sites, and by regularly bringing from the offshore facilities people, and spent or unnecessary materials and equipment. The work boats also assist in towing MODUs from exploration point to exploration point, within a permit area, and from one permit area to another.

  11  The tribunal also found that the onshore operations were controlled by those in charge of, and situated on, the offshore facilities.

The issues

  12  Some of the claims for rebates made before the delegate of the respondent and the tribunal were not pursued before us. The issues raised before us were:

 (a)  whether any error of law was demonstrated by the tribunal in its upholding of the delegate's view that the applicant was not entitled to a rebate in respect of fuel used:

 (i)  by the supply boats travelling to and from the offshore and the onshore facilities (other than in respect of the supply of water and the removal of waste products under paras (n) and (s));

 (ii)  by work boats to assist in towing MODUs from one permit area to another (but not within permit areas - in respect of which movement the rebate was allowed); and

 (b)  whether any error of law was demonstrated by the tribunal in apportioning under para (z) (vide: "to the extent that") between transport activities giving rise to the rebate (see paras (n) and (s)) and transport activities not giving rise to the rebate (being those in (a) (i) and (ii) above).

The first issue

  13  The argument of the applicant in relation to (a)(i) and (ii) in [12] above turned on the meaning of the word "place" in para (z). The applicant submitted that one could only come to a conclusion about what was the place "where a mining operation is carried on" by first understanding what was the "mining operation". At one level, that is self evident. However, the importance of the submission rested in the associated assertion that if one found a single integrated mining operation, then all elements of that operation must be regarded as being conducted at or on a single "place". So, it was said, if it be the case (as it was said to be) that the applicant conducted one integrated mining operation (offshore, onshore and on the transport route between) then the diesel fuel used to transport people, equipment and goods between the MODUs and FPSOs and the onshore facilities was not used for transport to and from such a place, but it was transport within the confines of such a place.

  14  Essential to the argument was that the identification of the place was controlled, as a matter of statutory construction, by the factual conclusions reached as to the nature and extent of the mining operation. The applicant contended that if there was a single, integrated mining operation encompassing exploration and production offshore, the storage and support areas onshore and the transport between, then, as a matter of statutory construction, all that activity was conducted at or on one place. There arose therefore no occasion to decide, as a matter of fact, the location of the "place" or "places" where the mining operation was carried on. The answer to this question flowed ineluctably from the identification of the one integrated mining operation.

  15  The tribunal rejected this contention. In [57] to [61] of its reasons the tribunal stated the following:

   

 57.  The conclusion contended for by BHP also requires a determination that there is only one relevant place where mining operations are carried on, and that where there are onshore and offshore activities the place will be an area including those locations and the area in between, even though that may involve a distance of more than one hundred kilometres. This is "the area of activity". However, we do not think that two mining locations and the space between, such as is present here, can be characterised as one place consistently with the provisions of sub-paragraph (z) even where the two mining locations are part of one integrated activity.

 58.  We also cannot see why characterising such an area as one place, even if this was appropriate, would preclude the components also being described as places. If an onshore base and offshore location, and the sea between, can be characterised as one place we do not see that that has the consequence that the onshore and offshore locations cannot also separately be described as places. The fact that it can be said that one of the places where a miner carries out mining operations is Western Australia does not preclude it being said that one place of its operations is, for example, Kalgoorlie.

 59.  We would add that we entirely accept that BHP could not have conducted all its relevant operations from its offshore locations. It would have been practically impossible for it to do so because of the limited storage facilities available at the offshore locations. We also accept that the onshore operations were controlled from offshore. However, that does not seem to us to affect the above reasoning or conclusions. It may be worth noting that if it had been possible for all its relevant activities to have been located offshore and in close proximity to the drilling and production sites, as would apparently be the situation with ordinary onshore mining, then, even on the applicant's construction of the legislation, it would be unlikely that rebate would be available for the sea transport of the goods to the offshore location, at least if undertaken by third parties before delivery to BHP. However, we accept that it was necessary for BHP to carry out its operations as it did.

 

…

 60.  The words of sub-paragraph (z) are squarely attracted by all BHP operations in moving goods between its onshore bases and its offshore locations. Plainly those activities amount to transport. Equally plainly they are to or from places where mining operations are being carried out. It matters not that the movement is from one place where mining operations are being carried out to another place where mining operations are also being carried out, or that the whole area might also be described as one area or place. We note, however, that we do not consider that that can be said in the present case. Of course, where there is one site and movement within that site, for example from a store to a mine shaft which is one hundred metres away, the provisions of sub-paragraph (z) will not be attracted. However, that kind of movement has, in the present case, been allowed by the delegate. Such an approach could not apply where, as here, the movement is over many kilometres of ocean not occupied by the miner and not used by the miner otherwise than as a transport route.

 61.  Similar considerations must apply where an MODU is being moved from one field to another. Questions of fact and degree will arise for smaller movements. Movements within a field might not be regarded as within sub-paragraph (z). However, in the present case all such movements have been allowed for rebate. In our opinion, movements from permit to permit must fall within sub-paragraph (z).

  16  The applicant submitted that these paragraphs revealed legal error in one or other of 2 respects. If the tribunal is to be taken as having found that the applicant was conducting one integrated mining operation onshore and offshore, transportation was a necessary part of that operation; and thus, as a matter of statutory construction, the place where such operation was carried on was the whole area onshore, offshore and the transport route in between. Thus, para (z) could not, as a matter of law, exclude the rebate otherwise payable, because the transportation was undertaken as part of the mining operation referred to in para (a) or (b), or within the place where the mining operation was carried on, and not to or from such a place for the purpose of para (z). Alternatively, if the tribunal is not to be taken as having found that the applicant was conducting one integrated mining operation onshore and offshore with transport as part of that operation, it failed, by misunderstanding the statute, to make a necessary factual finding identifying the "place" for the purpose of para (z), as required by the definition of "mining operations".

  17  The applicant contended that, in the former case, the appeal should be allowed and the applicant's claims for rebate allowed; in the latter case, the appeal should be allowed and the matter remitted to the tribunal to make that finding or undertake that factual enquiry.

  18  In our view, the applicant's argument should be rejected. There is nothing in the statute which requires the conclusion that, as a matter of statutory construction for the purposes of the definition of "mining operations" in subs 164(7), a mining operation that can be said to be one integrated operation must necessarily be carried on in only one "place" within the meaning of para (z), being a location bounded by the perimeter of all areas of that activity, including the transport routes used from time to time.

  19  It will often be the case that a mining operation is carried on only at or on one place or location or site; but there is nothing in the statute which would demand a conclusion that the one (and only) place where this mining operation was or could be carried on was onshore and offshore and in the corridor of water used, from time to time, in navigating the supply boats or tugs, (or air corridor used, if aerial transport is deployed).

  20  In [60] of its reasons the tribunal asked itself whether, as a matter of fact, it could be said that "a mining operation" was being carried on offshore at the MODU or FPSO, to which the answer was, yes. On this basis it was, as a matter of fact, open to the tribunal to conclude that the supply boats and tugs were transporting people, equipment or goods to and from such places. (We interpolate, even if for one purpose it might be said that such transport was an integral part of the (one) mining operation being carried on.)

  21  Bound up with the approach of the tribunal was the proposition that one complex integrated mining operation involving offshore exploration, drilling and production, onshore logistical support and connecting transport, supply lines and any other necessary connective apparatus can be carried on at or on more than one place. Whether it is carried on at or on one or more places is a question of fact. We agree with this approach. It conforms to the words of the definition and leads, in our view, to a rational and coherent conclusion conformable with the plain use of English.

  22  The applicant's argument would require negative answers to all of the following questions in the context of para (z):

 (a)  Is a mining operation carried on at an MODU?

 (b)  Is a mining operation carried on at an FPSO?

 (c)  Is a mining operation carried on at the onshore base?

 This would be required even though the MODU and those on it were engaged in "exploration" for oil (see para (a)), and even though the FPSO and those on it were engaged in operations for the "recovery" of oil (see para (b)).

  23  We see no basis in the statute for any such conclusion. Plainly, as a matter of ordinary English and as a matter of fact, it is open to conclude that the answer to each of the questions in the preceding paragraph is yes, whether or not there is one integrated mining operation. The contrary conclusion rests on the premise put forward by the applicant by way of assertion that once one has identified the mining operation one has identified the single place where it is carried on.

  24  Precisely why the terms of the definition of the phrase "mining operations" lead to the conclusion contended for by the applicant is not apparent to us. It was said that one starts with paras (a) and (b); and if one finds one integrated mining operation by reference to the contents of those paragraphs, that is what is referred to as "a mining operation" in para (z).

  25  One difficulty is that paras (a) and (b) do not refer to integrated operations. The words of paras (a) and (b) contemplate certain activity which must be given appropriate reach in any given circumstances.

  26  Subsequent paragraphs in the definition refer to activities which in any given circumstance may or may not be viewed as part of, or ancillary to, mining operations. However, that is not the test for the inclusion of such activity within paras (a) to (w). A given activity either does or does not fall within paras (a) to (w). None of paras (a) to (w) supports persuasively the view that the word "place" in para (z) is to be ascertained by identifying the limits and scope of the integrated mining operation.

  27  A number of the paragraphs refer to a and the mining operation and the place at which it and other activity is carried on: paras (c), (f), (h), (i), (k), (l), (m), (n), (o), (p), (pa), (q), (r), (s), (t), (u), (va) and (w). The notion that there is only one place where a mining operation can (as a matter of statutory construction) be carried on may lead to absurd results in the application of some of these paragraphs. For example, though the respondent has agreed to the claim for waste products being taken from the offshore facilities to onshore, these would not be covered by para (s) because the place where the mining operation is carried on would include the transport route of the supply boat in the integrated mining operation. The concession of the respondent does not prevent the court from examining all provisions of the definition to come to a view about the meaning of para (z). Likewise the supply of water under para (n) could not include the connecting voyage onshore to offshore.

  28  Plainly, as was common ground between the parties, the rebate was intended to extend to the carriage of water to the place offshore where the mining operation is carried on and to the carriage of waste products from the place offshore where the mining operation is carried on. This is so even if, because of the physical and natural exigencies, one integrated "mining operation" is carried on offshore and onshore. The applicant would say that the water and waste product transport is part of the integrated mining operation, so that para (a) or (b) apply to it, rather than para (n) or (s).

  29  The above shows the unreality of the applicant's suggested construction. Paragraph (z) and indeed paragraphs such as paras (c), (n) and (s) should simply be approached (as the tribunal here did) by asking whether, as a matter of ordinary English and of fact, the transport was to or from a place where a mining operation referred to in any of paras (a) to (w) is, or is to be, carried on.

  30  The tribunal's conclusion that the supply boats and tugs (when the latter are towing rigs from permit area to permit area) transport people or equipment or goods to or from places where a mining operation is carried on were factual conclusions open to it: cf Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; 35 ATR 249; 96 ATC 5240 and Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at [24] to [28].

  31  The conclusion that we have reached is consistent with one of the legislative purposes, evident from the available secondary materials, to overcome cases such as CEO of Customs v Dyno Wesfarmers Limited (1997) 73 FCR 1 which turned on the extent to which one could identify an activity as part of the mining operations in question. The applicant's argument requires the identity of the "place" to be decided by the same kind of analysis, successful in Dyno Wesfarmers, which was sought to be overcome by the insertion of para (z).

The second issue

  32  On each relevant supply boat voyage there was the supply of water for para (n) or the removal of waste products for para (s).

  33  The applicant submitted that neither subs 164(1) nor subs 164(5) contemplated apportionment. It submitted that since each voyage of the supply boats to the offshore sites carried water (and so fell within para (n)) and since each voyage of the supply boats from the offshore sites carried some waste products (and so fell within para (s)) the rebate was payable for the diesel fuel used for all such voyages, irrespective of whether anything else was carried. It was submitted that the activity of transport cannot be apportioned.

  34  However, the submission ignores the fact that para (z), in its terms, contemplates an activity (transport) of an eligible and non-eligible kind. The phrase "to the extent that", in terms, it seems to us, calls for an apportionment between the transport contemplated within para (z) insofar as it is not eligible and insofar as it is eligible.

  35  If such apportionment is available, the decision as to the appropriate apportionment will generally be a factual question. No error of legal principle was propounded by the applicant here other than its primary argument that apportionment was not, as a matter of law, permitted.

  36  We see no error in the tribunal's approach.

  37  The application should be dismissed with costs.